hollywood billionaire

Chapter 570 Do You Care If I Buy a Football Team? (Part 2)

"Crystal Palace is not in a good state lately."

Benteke pushes the ball out from the center circle, and the home team of Selhurst Park launches the first attack.

In the signature London afternoon mist, Turki's first comment on the match was a criticism of the home team.

“I know that since October, they have lost seven out of nine games, only winning against Southampton and drawing with Hull City. If this continues, they will soon fall into the relegation zone,” Han Yi responded.

"No, I'm not talking about their performance on the field." Turki snorted and shook his head, saying, "Although this club isn't in a serious financial crisis right now, and may even be profitable this season, this situation can't last... You know about the new broadcasting agreement for the Premier League this season, right?"

"I know," Han Yi nodded and replied, "an agreement that benefits every team."

2016 marked the first year of the Premier League's new three-year television broadcasting agreement. The new agreement was primarily divided into two parts: domestic broadcasting rights and international broadcasting rights. Domestic broadcasting rights were the most valuable part of the agreement, totaling £51.36 billion, a 70% increase over the previous cycle. Sky Sports and BT Sport paid £41.76 billion and £9.6 million respectively. Meanwhile, the BBC paid £2.04 million to retain the rights to broadcast highlights from its famous "Match of the Day" program.

In addition, the total value of international broadcasting rights has also increased significantly. By selling the rights in different markets, the Premier League will receive a total of approximately £30 billion over three years, bringing the total value of global broadcasting rights for the entire cycle to over £80 billion.

But that's not all. The most revolutionary aspect of this agreement is that it completely changes the Premier League's previous revenue distribution model. For domestic revenue, 50% is split equally among the 20 clubs, 25% is allocated based on match results, and 25% is distributed according to the number of matches broadcast by the broadcasters. International broadcast revenue and other commercial revenue are 100% split equally among the clubs. This distribution model significantly narrows the wealth gap between the top clubs and smaller clubs. In the 2016-17 season, the eventual champions, Chelsea, currently battling to maintain their top spot, will receive approximately £1.51 million in total broadcast revenue. Meanwhile, Sunderland, relegated to the Championship, will receive a whopping £9350 million.

It is precisely because of this agreement that mid-to-lower-tier clubs like Crystal Palace can also receive a guaranteed TV broadcast revenue of nearly £1 million, enabling them to make huge investments in the transfer market and wages.

But fortune and misfortune are always intertwined. While revenue increased dramatically, a fatal problem concerning the club's survival also emerged.

"The current chairman, Steve Parish, took over the club in 2010. At that time, Crystal Palace was in a serious financial crisis, under takeover by creditors, and almost dissolved. At the critical moment, a four-person consortium led by Steve Parish acquired Crystal Palace, and with the help of fan-organized demonstrations, successfully bought back the perpetual ownership of Selhurst Park from Lloyds Bank. They did very well in the following years, gaining promotion to the Premier League in three years and achieving profitability in the Premier League for two consecutive years. Their revenue even exceeded nine figures for the first time the year before last..."

"In other words, the club's daily operations, wages, and player purchases within a certain range are sufficient in the short term. But Parish is well aware that to establish a long-term foothold in the Premier League, especially after the broadcasting rights agreement was renewed, the club must solve two massive infrastructure problems that cannot be squeezed out of annual operating profits—the rebuilding of Selhurst Park and the upgrading of the youth academy."

Turki extended his index and middle fingers and then pointed them at the field in front of him.

"You can see how outdated the facilities are here. It only has 26,000 seats, and the number of VIP boxes is extremely limited. Aside from the two boxes in the Presidential Stand, there are fewer than twenty other boxes in total. In contrast, the Emirates Stadium has a full 150 VIP boxes. Even if the box prices were the same in both stadiums, Arsenal would earn 7.5 times more revenue than Crystal Palace in this area alone. Not to mention other commercial revenue. Although they own the stadium in perpetuity, these outdated facilities can't attract high-end commercial sponsorships, let alone attract other large-scale non-football events."

"For the owners, these venues that can only be used on match days will become more of a burden than an asset over time." Han Yi deeply agreed with Turki's view.

“That’s right, but rebuilding the main stand and renovating the stadium will cost between £8000 million and £1 million. If that money comes from the club’s profits, it means we can’t buy players for several years. How can you stay in the Premier League if you can’t buy players?” Turki shrugged. “And then there’s the youth academy. Crystal Palace’s youth facilities are rudimentary and far behind other Premier League rivals. Although they produced Wilfrid, they can’t mass-produce young players as good as him, which means the first team not only has to spend a lot of money to buy players, but also can’t do any player sales… According to Parish, upgrading the youth facilities will cost £3000 million.”

"So, last year Parish faced a choice: continue with the current momentum and save up this money over 10 to 15 years, during which time the team is very likely to be relegated due to a sharp reduction in the transfer budget, or bring in external capital and achieve the goal in one step?"

"He chose the latter."

"Yes, like most owners of English football clubs, Parish went to his first choice – American financial giants across the ocean. Josh Harris, co-founder of Apollo Global Management, and David Blitzer, head of strategic opportunities at Blackstone Group, jointly invested £5000 million, acquiring a 36% stake, 18% each, the same as Steve Parish's share. The remaining 46% was held by secondary investors who invested but did not have decision-making power. The three jointly owned the club as a general partnership, but of course, Parish was still responsible for the club's day-to-day management and operations."

"I think that's the problem, isn't it?"

“Yes. In Harris and Blitzer’s view, Parish accepted their investment but not their existence, stubbornly sticking to his own methods. In Parish’s view, the two American partners are good for nothing but money; they want to use the MLS system to run the Premier League, but that will only plunge Crystal Palace back into the abyss.” Turki licked his lips and explained in more detail, “Harris and Blitzer are playing American sports. In their world, the business model is clear, controllable, and most importantly—there is no promotion or relegation.”

"Their teams, like the Philadelphia 76ers in the NBA, can tank for years on end, intentionally losing games to acquire the most valuable draft picks in the future with the lowest operating costs, thus completing their rebuild. Their £5000 million investment in Crystal Palace was clearly intended to upgrade the infrastructure. In their view, stadiums and youth training facilities are fixed assets and the basis for the club's valuation. Players, on the other hand, are expendable commodities that cannot serve the club's interests forever."

Turki gestured with his chin toward Benteke, who had just won a header on the field.

"So when they saw the £80 billion broadcasting deal come into effect in the summer of 2016, their first reaction was: Great! We have more money to accelerate stadium rebuilding and can start to strictly control player wage budgets so that the club can become profitable as soon as possible and distribute profits. This is standard financial logic, and there is no doubt about it."

“But Parish’s first reaction was: Great, we finally have the money to buy Christian Benteke.”

“Interesting.” Han Yi drawled thoughtfully. “As a local chairman who grew up in South London, he would naturally follow this logic when running a team. Of course, this logic is far more beneficial than harmful to him. Rather than paying out the club’s hard-earned profits as dividends to financial investors in the United States who may not understand football culture, it’s better to convert these funds into player assets that can enhance the club’s strength and market value. These assets can not only improve the team’s performance and consolidate his reputation among fans and in the industry, but also remain under his direct management.”

“Yes, after all, fans are one of the intangible assets of a club.” Turki smiled. “Parish was the one who used fan demonstrations to scare away Lloyds Bank and regain control of the stadium. He knows that the dividends from an 18% stake each season are far less than the intangible benefits he can gain by using that money to please the fans. If he wants to make money, he naturally has other ways.”

“Let me guess.” Han Yi immediately understood. “Although it’s a regular partnership, Parish has actual power over the club’s daily operations, strategic execution, and financial decisions. This is clearly stated in the institutional documents, right?”

“‘We look forward to supporting Steve’s role as a co-owner and leader of the club’s operations.’” Turki paused for a moment, then read aloud, “This is a joint statement issued by Harris and Blitzer last December.”

"Then, the club president's salary must have increased significantly in the past year, right?" "From £69.2 to £215 million, an increase of over 200%," Turki replied with a smile.

"Related party transactions?"

"The team's financial report revealed that Crystal Palace paid £11.7 in service fees to a construction project company called VMM this year, and £23.4 in rent to another entity called Smoke & Mirrors Group. Both companies are registered under Parish's name."

“All of this money doesn’t even add up to 300 million pounds, it sounds like a drop in the ocean.” Han Yi frowned in confusion. “If I were Harris or Blitzer, far away in the United States and unable to attend to other matters, I probably wouldn’t mind the club chairman taking some benefits for himself in these trivial matters that wouldn’t harm the club’s fundamental interests.”

“Harris and Blitzer don’t mind either, otherwise these deals would have been nipped in the bud long ago.” Turki raised his index finger. “Actually, the core contradiction is what I just mentioned: Parish is running the club like a fan. Or rather, he’s using investors’ money to do things that don’t conform to investment principles. This season, Crystal Palace’s revenue is expected to reach a maximum of £1.5 million, of which broadcast revenue will be around £1.15 million. But at the same time, staff salaries—including player salaries, coaching staff salaries, and backstage staff salaries—will also soar from £8060 million to £1.12 million. Parish expects to invest as much in the winter transfer window as he did in the summer transfer window, spending an estimated £1 million on player acquisitions. Amortized over this fiscal year, that’s £3300 million. It would be fortunate if the final pre-tax profit can stay above £1000 million.”

"As for the most crucial statistic, the wage-to-income ratio will remain stable at around 78-80%, which is already the highest in the Premier League and exceeds UEFA's warning line by nearly 10 percentage points."

"How do you know so much detail?" Han Yi couldn't help but ask.

“Because I’m not just a guest of Chelsea, I’m also a guest of Crystal Palace.” Turki spread his arms, winked at Han Yi, and laughed heartily and confidently. “What Chelsea wants is a strategic cooperation agreement for the Saudi league, while what Crystal Palace wants is for the Saudi Public Investment Fund to get involved. They contacted us a few months ago. To be honest, although the higher-ups aren’t that interested, they never refuse to give someone face, so they sent me here to conduct an on-site inspection first, and to do some investigation behind the scenes.”

At this point, Turki placed his raised arm on Han Yi's shoulder again.

“I told you, brother, that’s how it is when you do business with Saudis. We do thorough due diligence and label everyone… but not everyone can be like you and become one of our peers. At least Parish certainly isn’t.”

"You don't agree with his business philosophy."

"What's so convincing about that?" Turki asked, looking utterly exasperated. "Parish's two American investors aren't unwilling to spend money... but is such an aggressive financial policy really necessary? My analyst told me that when you add up expected wages and amortization—the two core costs directly related to players—Crystal Palace will be the only club in the Premier League this season whose total player costs exceed its total operating revenue. This shows that Parish's financial strategy has completely deviated from short-term profitability, investing all resources in improving the team's immediate fighting power. What is he planning to do? Does he really think he can challenge for the Champions League? The fans are happy now, but this irresponsible investment will only further increase the burden and hidden dangers for a small club located in the south suburbs of London."

"So Parish came to the wrong person."

Han Yi leaned forward slightly, glancing at Steve Parish, whose slicked-back hair, deep-set eyes, and hooked nose made up half his face suggested a shrewd hedge fund manager rather than a reckless club chairman. Strangely, at the same moment, Steve Parish's gaze also met Han Yi's. Their eyes locked, they exchanged a friendly smile, and then immediately returned to their respective conversations.

"He originally wanted to bring you into the game, get another investment, accelerate the stadium reconstruction, and use this to counterbalance American capital, didn't he?"

“That’s what he thinks, but we’re not stupid, and neither are Harris and Blitzer.” Turki turned his face to an angle where Parish couldn’t see him and winked at Han Yi. “Today is the first time I’ve met Parish, but two months ago, after I came to Las Vegas for Mad City, I met with Harris and Blitzer. They’re happy to see us get involved; after all, who doesn’t want to share the financial risk? Many secondary investors also want to take their money and run… Of course, if we do ultimately decide to get involved, we’ll definitely play a pivotal role between the Americans and the British. Anyone who wants to advance their agenda must first win our support.”

"It sounds like a great deal, a key strategic asset in a prime metropolitan area." Han Yi observed Turkey carefully. "Isn't it a bit of a shame to give up such a golden opportunity just because it's a few tens of minutes' drive from central London? After all... the New York Jets and the New York Giants both play in New Jersey, just across the river."

“But there isn’t a third NFL team on Manhattan Island, while London has… how many Premier League clubs again? Four? Five?” Turki scoffed noncommittally. “More importantly, even if we had the patience to establish ourselves here and spend ten or twenty years turning Crystal Palace into the next Chelsea, this kind of investment is definitely not what we want. If we have to start from scratch, then everything is out of the question except for 100% teamwork.”

“Crystal Palace is not like the music publishing fund we built together, brother. We are pursuing the same goals in the same direction, but they are trying to split the carriage in two and keep going. The Americans want to hit the brakes, build bases, and develop data models. Parish, on the other hand, is blindfolded, flooring the gas pedal, and charging forward recklessly. The three of them have equal ownership, but their philosophies are completely opposite. That’s why I say their off-field situation is more dangerous than their on-field situation.”

“I understand.” Han Yi nodded slightly. “But you’re telling me all this not just to share some gossip, right? Why are you going to explain the Crystal Palace Club situation to me in such detail?”

"Because my main task here is to give Parish a formal answer in person before the game kicks off."

“You rejected him,” Han Yi said in a declarative sentence.

“Very polite, but without leaving any room for negotiation.” Turki nodded. “I told him that we never participate in a civil war that has already begun, even if it is profitable for us. This is the order from above, not mine. The decision has been made and cannot be changed.”

He must be very disappointed.

“Of course.” Turki paused, a playful expression on his face. “But here’s the interesting part. After expressing his regret, he made a request that… surprised even me.”

Turki turned to look at Han Yi and said, word by word:

"He told me..."

“‘Your Excellency, I fully understand your position and respect it.’”

"But I wonder if your friend, Mr. Han, who came with you today, would also be interested in hearing about my plan?"

(End of this chapter)